"That’s the reality of Ireland’s solvency. It is entirely contingent on future economic growth of 2% nominal or more. Where this should be coming from is not clear to me.But in the short run, the show will go on. The readiness by the other Europeans to bail out Ireland is easily explained. The exposures by EU banks to Ireland, Greece and Portugal are massive.

Ireland is in a different league than the others. Unlike Portugal, Ireland could bring the house down, and that will still be the case, once Ireland’s insolvency is fully realised and understood. A breakdown by countries shows that Germany and the UK are most exposed to Ireland, Spain to Portugal, and France to Greece. If the periphery goes, the European banking system will have its own subprime crisis – in addition to the actual subprime crisis" (ver cuadro).

¿ Hacia dónde nos dirigimos?.Esta es su respuesta:

"There will be no immediate default. Ireland, and also Portugal, will come under the umbrella of the EFSF. Spain is more solid, but also highly vulnerable to a financial market squeeze. I would expect the EU to step in should Spain come under pressure. That could be through a series of bilateral programmes, or more likely an increase in the lending ceilings of the EFSF. The likelihood of such an event would be hard to predict. I would expect Spain to be ok, but Spain, too, needs to return to some solid growth.

The eurozone’s core – not just Germany – is hostile to what they call “a transfer union”. That’s Germany, the Netherlands, Austria, and Finland. You would not get majorities for such a transfer. Nor would it be politically possible, and in Germany’s case not constitutional either, to establish a fully-fledged fiscal union. Of the various inconsistent constraints, default is the one that will be accepted.

The wider ramifications of all this are utterly underestimated by Europe’s political leadership. I leave you to draw the conclusions."